Brexit: What does it mean for the social enterprise sector?

PSEN was represented at a national event exploring the implications of Brexit for our sector. We heard from economists, lawyers and other social entrepreneurs. Peter Holbrook from Social Enterprise UK set the scene with his overview of what to expect and the SE:UK response so far:

Investment in infrastructure is likely, including another London runway, HS2 and development in the North. This will create supply chain opportunities for social enterprises.

Civil servants are going to be very busy, so there will be little time, money or impetus for public service reform or investment.

Existing social enterprise infrastructure and investment such as Big Society Capital, Big Local, Power to Change are likely to remain unchanged and will help to create resilience.

Possible opportunities include relaxed procurement and state aid rules and fairer trade with non EU countries.

The Office for Civil Society, which has responsibility for Social Enterprise has been subsumed by the Department for Culture, Media and Sport. SE:UK are making representations about this.

The social enterprise sector has made huge progress in the last ten years, so whilst this may prove to be a lean period, we’re in good shape to see it through.

Some of the questions posed by PSEN members are answered below. Most of the responses represent the “best guess” of the experts present and the situation may already have changed by the time you read this!

What can we expect with regard to ERDF and other European funding proposals currently in the pipeline? When can we expect definite decisions?

The overwhelming message was not to expect regional development funds to be replaced by Westminster. There’s reasonable optimism that where contracts have already been agreed, funds should be safe, but where there’s any ambiguity we just have to wait and see. We heard conflicting responses about Building Better Opportunities funds. Different advisors seemed to have been saying different things. There’s no clear indication as to when we’ll know more but SE:UK has promised to keep members updated.

Can SE:UK get behind lawyers contesting the legality of the referendum?

We had an update on the legal challenges to Brexit from Abbie Rumbold of BWB Solicitors, specifically the emerging challenge which focuses on whether the Government has the power to invoke Article 50 without reference to Parliament. Abbie explained that, for constitutional reasons, the courts are unwilling to intervene on matters of policy, so the High Court may decide that the matter is “non-justiciable”, something on which they cannot rule.

Even if the challenge is heard and is sucessful, MPs will be under significant political pressure to vote in line with ther referendum result. Legal challenges, whilst important, are unlikely to change anything much.

How can the social enterprise movement, ensure that we do not participate in a “race to the bottom” by maintaining employment rights, nurturing employee relations and building staff engagement if legal employment protections are reduced?

Paul Jennings, also from BWB, pointed out that there will be 17,000 pieces of legislation to review as we leave the EU meaning there will be significant practical advantages to keeping most of it the same. Much of EU employment law was already in UK law anyway, and there are likely to be trading reasons to maintain similar standards, but there are some areas where he thinks change is likely:

Discrimination law – introducing positive discrimination in some areas such as board quotas

Relaxation of TUPE

Simplification of working time and agency worker regulations

There was general agreement that social enterprises want to maintain good employment conditions, but that it’s too soon to agree on any specific proposals.

What would the various possible relationships with Europe (e.g. Norwegian model) mean for EU funding for social enterprises in the South West?

Any model which, like the Norwegian one, includes full membership of the EEA will involve participation in the regional development funds. The so-called Swiss model (free movement of goods and people, but not services) is unlikely to be on the table, as that’s being renegotiated anyway. Other models which focus on trade in goods such as those with Canada or Singapore won’t be particularly favourable to the UK as 30% of our exports are in financial services.

What will happen to EU procurement rules?

We won’t have to follow them. But all public authorities have their own rules, many of which are at least as complicated! The Social Value Act has already inspired many local authorities to bust some EU regulation myths and use procurement to support local business and social enterprises.

What about State Aid?

State Aid rules prevent governments from supporting national or local businesses where this would create an unfair advantage over competitors from other European countries. Brexit creates the possibility that government money could be used to benefit social enterprises.

Finally…

There has been plenty of analysis and commentary about the social and economic precursors of the referendum result: inequality, lack of voice, a sense of being “left behind”. We finished by observing that these are the very things social enterprises exist to address. So, if Brexit isn’t the solution maybe social enterprise is?